By SANDRA HONG, Staff Writer
Regulations favoring holders of special San Francisco taxi permits, sold for $250,000 each, do not constitute equal protection denials because they are permissibly aimed at giving a boost to drivers whose earnings have been impaired by Uber, Lyft, and other ride-sharing services and easing traffic congestion at the municipal airport, the Ninth U.S. Circuit Court of Appeals held yesterday.
The opinion by Judge Kenneth K. Lee affirms a judgment on the pleadings granted by District Court Judge William Alsup of the Northern District of California. Circuit Judge Patrick J. Bumatay and District Court Judge Roslyn O. Silver of the District of Arizona, sitting by designation, joined in Lee’s opinion.
Alsup’s judgment terminated a lawsuit challenging regulations that give preferential status at the airport to drivers carrying the special permits, called “medallions.” Alsup said the regulations are permissible because they further three governmental interests: decreasing traffic congestion at the airport, increasing taxi service within the city, and easing the financial burden for taxi drivers who purchased $250,000 medallions before tech giants such as Uber and Lyft disrupted the taxi industry.
“There can be no dispute that the first two interests are legitimate,” Lee said in his opinion, adding:
“The parties focus mainly on the third proffered interest—alleviating economic harm for Purchased medallion holders.”
Went on Sale
The San Francisco Municipal Transportation Agency (“SFMTA”) started selling the $250,000 medallions in 2010, which enabled drivers to operate their own cabs. Uber was launched the same year, with Lyft following shortly after that.
The agency’s 2018 regulations were intended to help struggling medallion drivers, including giving them the lucrative advantage of having first dibs on airport passengers.
Drivers without post-2010 medallions sued, alleging violations of state and federal equal protection laws, as well as state environmental and age discrimination laws. The drivers argued the city’s regulations amounted to unlawful economic favoritism, but Lee said they failed to show the regulations had no legitimate or rational basis.
“Rather, the rational reason is plain: Purchased medallion holders bought or financed expensive permits from the City only to have the rug pulled out from under them by an unexpected disruptive technology. That the City would try to mitigate the fallout for those most affected by a shift in the market is a permissible state purpose, even if some may question its policy wisdom.”
Lee’s opinion remands other state law claims for a determination as to whether leave to amend should be granted. The plaintiffs alleged the regulations run afoul of the California Environmental Quality Act (“CEQA”) and age discrimination law under California Government Code §11135.
Lee agreed with Alsup that the 2018 regulations are not subject to CEQA because they do not constitute a “project” under the act. Drivers argued that the regulations would increase the number of trips to and from the airport without passengers, but Lee said such claims are unsupported.
“At least based on the complaint, the assertion of significant environmental change appears to rest on speculation,” he wrote. “Thus, the 2018 Regulations are not a project per CEQA, and the Drivers pleadings fail to plausibly claim otherwise.”
Age Discrimination Claims
Lee also determined that the plaintiffs failed to show that the regulations are governed by Government Code §11135, which forbids age discrimination through “any program or activity that is conducted, operated, or administered by the state or by any state agency” or one “funded directly by the state, or receives any financial assistance from the state.”
Drivers argued since the SFMTA receives state funding, any actions it takes are subject to §11135 prohibitions. The city argued state funding must be directed at the program under scrutiny.
Lee concluded that state funding of “one arm of local government does not necessarily reach all limbs and digits of that government and thus it does not extend that the state’s anti-discrimination law to every local government activity.”
“Drivers make only the bare assertion that because the SFMTA generally receives some unknown quantity of state funding, section 11135 applies to the taxi medallion program. Based on that cursory allegation in the complaint, the Drivers have not plausibly alleged that section 11135 governs the taxi medallion system.”
The case is San Francisco Taxi Coalition v. City and County of San Francisco, 19-16439.
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